Sheboygan questions legality of health costs plan

City leaders expressed skepticism at the legality and feasibility of a proposal for a new health care coverage plan — though the company pitching it says it could net some savings for the city.

In July, Mayor Mike Vandersteen put forward the idea of exploring a medical reimbursement plan suggested to him. While the benefits for the plan sounded promising to members of the Salaries and Grievances Committee, many also admitted they found the plan confusing and said they would revisit the issue when members of the group pushing the plan came to Sheboygan.

At Monday's meeting of the city Salaries and Grievances Committee, Legal Benefits Group Inc. managing partner Rickey Gooch presented the plan, but was met with even more caution from the committee.

Gooch detailed an Employee Sponsored 105b plan, which allows employers to reduce FICA contributions when an employee funds their own Medical Reimbursement Account. The employee takes out a loan to fund the contribution, which is paid back with the savings the employee gets on their paycheck given a small tax contribution. The loan itself is guaranteed through the purchase of a life insurance policy.

The list of 105b benefits included up to 75 percent coverage of out of pocket, co-pays and out-of-network costs.

Gooch said all employees would have equal access to the Employee 105b Program because of a loan option in which the collateral for the loan is an employee life insurance plan that lists the lender as the loan beneficiary.

“I understand that if you mention the word ‘loan,’ people are scared to death,” Gooch said. “But, the money is guaranteed to be paid off for you — you have a loan that is paid in tax savings. Is that 100 percent sure every time? Yes, it is.” Gooch explained that as a result of increased tax savings and life insurance, there is no out-of-pocket cost for the employee or employer under the 105b plan.

After initially connecting with Gooch in July, committee members wanted to have an attorney specializing in ERISA law — which sets standards for voluntary pension and health insurance plans \— review the plan before taking action, and the sentiment appeared unchanged at the most recent meeting.

“I absolutely won’t support anything unless I have an ERISA ruling,” Council President Don Hammond said. “No offense, but there are a lot of red flags with this, whether it be ERISA law or (Affordable Care Act). I don’t pretend to be an expert on those and do not want to put the city at risk.”

Gooch responded that he already took the initiative to have a lawyer review the plan and described his attorney’s credentials as “the best in the country.” Committee members still stressed that they want to hire their own attorney.

“A couple getting married is like the city and your plan; we want a prenuptial agreement, so both sides need to have an attorney if you want that agreement to be worth something,” Salaries and Grievances Chairperson Mary Lynne Donohue said.

Gooch said, “You can hire one, but he will say the same things as our attorney, so what’s the difference?”

Further discussion revealed Gooch sent City Administrator Jim Amodeo his lawyer’s six-page opinion, which did not include a private letter ruling. The Sheboygan Press has sent a records request for emails and documents to Amodeo's office.

When the committee asked why Gooch did not just bring a copy of the legal opinion for everyone at the meeting, he said it was imperative that the committee select which specific members would have access to the information for confidentiality reasons.

“Our company owns this system, and for someone else to own this system, all they have to do is get our information and become our competitor,” Gooch said. “We only share information with CPAs and attorneys and ask them to decide who within an organization is going to see it, because if it ended up on the Internet, there’s going to be a lawsuit against that CPA or attorney.”

Hammond raised concerns that abiding by Gooch’s terms could violate Wisconsin law by withholding information from the media, and he would not want to ask the committee and council to make decisions based on information that only some individuals have been allowed to access.

Ultimately, the committee approved a motion asking City Attorney Charles Adams to review the legal opinion and work directly with the Legal Benefits Group representatives to create a scope of work better outlining what costs the implementation of such a program would have for the City of Sheboygan.

Adams’ report will be presented at the next Salaries and Grievances meeting.

Reach Leah Ulatowski at 920-453-5134, Lulatowski@sheboyganpress.com or @Leah_Bekah on Twitter.